Direct agriculture payments hanging under budget sword

Aiming to carve a chunk out of the federal deficit as the next farm bill is written, the White House would slash agriculture spending $32 billion over 10 years – including the elimination of direct payments, which cost nearly $5 billion annually.

If the White House’s proposed fiscal year 2013 budget is enacted, the USDA would face a 3 percent spending cut. The election-year proposal comes as 2011 farm incomes are projected at a near-record $22 billion.

Aiming to carve a chunk out of the federal deficit as the next farm bill is written, the White House would slash agriculture spending $32 billion over 10 years – including the elimination of direct payments, which cost nearly $5 billion annually. In recent months, Congress proposed whittling the USDA budget around $23 billion.

The suggested funding cuts are unlikely to shock farmer advocacy and commodity groups as they are similar to previous Obama administration budget proposals. Those cuts include:

Crop insurance subsidies cut over $7.5 billion over the next 10 years.

Two million acres removed from the Conservation Reserve Program.

A slight drop – 0.6 percent – that would bring the cost of food stamps to $70 billion.

“The budget we’re proposing will give us the ability to utilize time to manage the cuts that have already been ordered over the course of the last couple of years,” said Agriculture Secretary Tom Vilsack during a Monday afternoon press conference. It will “give us additional time to properly implement additional changes that will be forthcoming as a result of our ‘administrative services project.’ And it will enable us to continue to provide the help that has led to record income levels for producers and lower unemployment in rural America.

“It is important when looking at this budget that you put it into context of what’s taken place over the course of the last couple of years. We’ve seen reductions in our discretionary budget and the operations budget for USDA. That, together with inflation, has required steps (that include) reducing costs for travel, supplies, and conferences. It has led to us reducing our workforce of experienced workers by over 7,000 over the last 15 months through normal attrition and through early retirement and early separation programs. It has also resulted in the implementation of the first 27 of 379 recommendations for changes in internal operations of USDA under the administrative services projects as well as the office and lab closings announced earlier this year.”

Vilsack said there have also been funding reductions of mandatory programs including “reduced growth rate in conservation programs combined with crop insurance savings. … We anticipate there will be additional savings as Congress debates, and ultimately passes, the (next) farm bill. We see 2012 and 2013 as years when we can implement changes in a thoughtful way.”

Commitments

In Obama’s proposed budget, “there are small increases in overall discretionary spending due, in part, to fully funding the Women, Infant and Children (WIC) nutrition program for the full participation of 9.1 million people,” said Vilsack. “And there’s a significant increase in our competitive research grant allocation. Even with those increases, the amount in our discretionary budget is roughly the same as it was in 2011.”

On the mandatory side, “we do see increases but those are primarily a result of a function of the 2008 farm bill as it relates to crop insurance and the fact that there are double payments being made in fiscal year 2013. A shift in timing of those payments has led to an increase in our mandatory funding.”

Further, there is “growth in the farm and commodity portion of our budget. Conservation is roughly at 22 percent, up from 19 percent last year. And there’s a decline in the percentage of our budget allocated to nutrition assistance programs from 75 percent to 72 percent.”

The proposed budget will “allow us to avoid disruptive furloughs and significant layoffs, which would be disruptive to services important to folks in rural America.”

It will also allow the farm economy to expand, claimed Vilsack, who cited a list of continuing commitments:

A commitment to exports by fully funding the Market Access Program (MAP), which is “extraordinarily important” to promotion of agricultural exports. Every dollar spent on MAP generates $35 in trade activity.

Commitment to support extension of domestic markets through the funding of rural development programs as well as a number of energy programs in the 2008 farm bill. The Rural Energy for America Program (REAP) will continue “although it will be a substantially reduced commitment,” said Vilsack.

Commitment to the farmer credit. “Roughly, 29,000 farmers will benefit from the credit in this budget.”

Commitment to the MIDAS (Modernize and Innovate the Delivery of Agricultural Systems) program, which aims to modernize USDA offices with up-to-date technology. This “will make it easier for producers, in the long run, to access programs that the Farm Service Agency will require.”

Insurance, conservation, energy

Under Obama’s budget, crop insurance will also receive funds as well as the 2011 SURE payments. The White House “will encourage Congress to extend disaster payments and programs in some form or fashion in the (next) farm bill,” said Vilsack. “It’s relatively the same proposal as in previous years. It looks at catastrophic coverage, it looks at ANO caps, and reasonable and appropriate returns for companies.”

As for conservation, the proposed budget “will support 360 million acres. CRP (Conservation Reserve Program) would be capped at 30 million acres. … An additional 29 million acres (would be funded) under the EQIP, CSP and other programs.”

Queried on the next farm bill and the current divisive dynamics in Congress, Vilsack said “Everyone knows we need a farm bill.” Groups around the country “from virtually aspect of the farm bill” recently expressed in a letter to Congress a desire for a new farm bill in 2012. “The reason is simple. There is a strong desire to have certainty, an understanding of what the rules will be. Given the fact that we’re seeing good, solid (farm) income, we don’t want to do anything … to upset the momentum.”

Meanwhile, leadership in the agriculture committees, “have stepped up and have a desire to get things done. … They have scheduled hearings and begun the process.”

Vilsack expressed a desire to work with Congress on a new revenue guarantee proposal. Is that reflected in the proposed budget?

“It’s reflected in the sense that, in the budget where (Obama suggests) direct payments be removed, (he) also talks about the need for a continuation of disaster. I believe it’s somewhere in the neighborhood of $8 billon to $9 billion allocated for that purpose. Obviously, we see some adjustment. … Again, the budget is looking at a 10 year horizon.”

According to Vilsack, fiscal constraints the USDA faces involve three pots of money: farm payments, conservation, and nutrition assistance.

“There’s a general consensus that the direct payment system is going to change. It will change because fiscal realities will necessitate it. It will change because it’s very hard to explain to the 98 percent of the population that doesn’t farm why farmers are receiving payments when we’re seeing record, or near-record, income levels…

“We continue to need a safety net. So, we’ll work with Congress to reshape that safety net to provide the help and assistance that farmers need, when they need it. That will probably involve continued commitment to crop insurance as well as some kind of revenue protection program that will help folks when they’re really hurting.”

What about energy programs?

“Congress has basically limited (funds) available to us” for the Biomass Crop Assistance Program (BCAP). “Congress must decide if they wish to reauthorize (energy) programs within the context of the 2012 farm bill. Unfortunately, few of them were funded for the length of the 2008 farm bill so they aren’t in the baseline. That creates a set of challenges.”

There was a 96 percent reduction in BCAP funding over the last year. “We’ll try to figure out how to use those limited resources – I think it’s $17 million – as effectively as possible. There are two responsibilities of BCAP: identify project areas that encourage non-food feedstocks to be produced; and the collection/storage/transportation expenses for producers.”